Introduction
This section provides guidance on how to document and qualify income a borrower receives from sources other than their job. This includes a wide range of income types such as money received from alimony, child support, boarders living in your home, and many others.
Documentation Requirements for Current Receipt of Income
When you’re applying for a mortgage, you need to show that you’re currently receiving the income you claim. The documents you need can vary based on the type of income. For example, you might use recent pay stubs, bank statements that show direct deposits, court records, or copies of checks you’ve received. It’s important to prove not only that you’re getting this income now but also that you’ve been receiving it regularly for some time. However, if your income includes anything from cryptocurrencies, like Bitcoin, it can’t be used for your mortgage application. Also, if you’re showing assets to prove you’ll continue to get income, these can’t be in cryptocurrencies either.
Alimony, Child Support, or Separate Maintenance
If you receive alimony, child support, or separate maintenance, you need to show that these payments will continue for at least three years after you apply for the mortgage. You can use documents like divorce decrees or other legal agreements to show the amount and duration of the payments. You’ll also need to show that you’ve been receiving these payments regularly for the past six months or more. If these payments are inconsistent, they might not be counted as income. Remember, you have to choose to include this income on your loan application for it to be considered.
Automobile Allowance
If you get an automobile allowance, it can be counted as income, but you must have been receiving it for at least two years. The full amount of the allowance is added to your income, and if you have any car payments, those are added to your debts.
Boarder Income
Income from having a boarder can sometimes count, especially if you live in the same home or if the boarder is helping because of a disability. You need to show a history of shared living space and payments for the last 12 months.
Capital Gains Income
Money made from selling investments (capital gains) usually isn’t counted as regular income because it’s not consistent. But if you need it to qualify for a mortgage, you must show a two-year history of capital gains and prove you have more assets that could be sold if needed.
Disability Income — Long-Term
For long-term disability income, you need to show your disability policy or a statement from the payer. This documentation should confirm that the payments will continue for the foreseeable future.
Employment Offers or Contracts
If you have a job offer or contract that starts soon, you may still qualify for a mortgage. The offer needs to be in writing and show your future income. If you haven’t started the job yet, there are specific rules about when your start date can be.
Employment-Related Assets as Qualifying Income
Sometimes, your savings or retirement accounts can be used to show income. There are specific rules about which accounts count and how to calculate this income.
Foreign Income
Income from a job outside the U.S. can be used, but you have to provide two years of tax returns and make sure all documents are in English or translated accurately.
Foster-Care Income
Money received for providing foster care can be considered income if you have a two-year history of providing care. If this income makes up a large part of your total income, there are additional considerations.
Housing or Parsonage Allowance
If you receive a housing allowance, for example, from a church, it can count as income. You need to show you’ve received it for the past 12 months and that it will continue.
Interest and Dividends Income
Income from interest and dividends can count, but you must show a two-year history and ownership of the assets generating this income.
Mortgage Credit Certificates
If you have a mortgage credit certificate from a state or local government, it can help you qualify by reducing your tax liability, effectively increasing your income.
Mortgage Differential Payments Income
If your employer pays part of your mortgage, this can be added to your income. You need a letter from your employer stating this benefit.
Non-Occupant Borrower Income
Income from someone who won’t live in the house but is co-signing the mortgage can sometimes help you qualify.
Notes Receivable Income
If you’re receiving payments on a note, it can count as income if it’ll continue for at least three years, and you’ve been receiving it for at least the last 12 months.
Public Assistance Income
Income from public assistance programs can count if it will continue for at least three years.
Restricted Stock Units and Restricted Stock Employment Income
Income from restricted stock or stock units can be considered if it’s been vested and you have a history of receiving it.
Retirement, Government Annuity, and Pension Income
Retirement income can be used if you can show it will continue for at least three years.
Royalty Payment Income
Income from royalties can be considered if there’s a history of at least 12 months of payments and it’s expected to continue.
Schedule K-1 Income
Income from partnerships or S corporations can be used if you can show it’s been distributed to you and is consistent with past income levels.
Social Security Income
Social Security income can often be used, whether it’s based on your work history or someone else’s, as long as it will continue.
Temporary Leave Income
If you’re on temporary leave from work, your income can still be considered under certain conditions. You need to show when you’ll return to work and how much you’re being paid while on leave.
Tip Income
Tip income can be included if you’ve reported it on your taxes for the last two years.
Trust Income
Income from a trust can be used if the trust has been established for a while and the income will continue.
VA Benefits Income
Benefits from the Veterans Administration can count as income, excluding certain educational benefits.
References
For more details, visit Other Sources of Income of the Fannie Mae Selling Guide.